Why the job market still stinks

Don't believe the drop in the unemployment rate. There is still something very wrong with the economy.

By Anthony Mirhaydari Feb 3, 2012 2:05PM

Risky assets are on the move after the January employment report beat expectations with 243,000 jobs created and the unemployment rate dropped two-tenths to 8.3%. While the headline numbers were good, the details are decidedly less so. But why let things like details and facts get in the way of a market melt-up? It's all sunshine, butterflies and rainbows, right?


I don't know how else to say this, but the "improvement" in the job market is a hoax. The drop in the unemployment rate is coming mainly from people leaving the work force in record numbers -- 1.2 million, mostly young folks who we need to support the housing market. Those who are finding work are finding part-time, low-wage positions. No wonder "hard" economic data such as a drop in retail sales and a rise in the savings rate suggest a lack of progress out there.


In fact, during the month the number of full-time workers fell by 1.1 million. Not exactly a sign of strength. And there's more where that came from.


One of the best ways to filter out the government's meddling in the data is to just look at how many people are working, or want to work, compared with the overall population. This cuts to the quick and ensures that people who are dropping out of the work force in frustration are still counted among the jobless.


The chart above says it all. It shows the number of people working full time as a percentage of the overall population. And I removed the government's seasonal adjustment for good measure.


These are the raw, unadulterated numbers. And they aren't pretty.


The percentage of the population working full time has returned to recessionary levels (but the recession is over, right?) and has dropped to the lows of the 1970s and 1980s.

To give you an idea of the shortfall: To get us back to the 54.7% full-time employment rate seen back in 2000, the economy would need to create nearly 21 million more jobs. Compare that with the official estimate of the number of unemployed workers, at 12.8 million.


Even if we believe the government's estimate that 243,000 jobs were created in January, and assuming the population doesn't grow, it would take seven years to get back to where we need to be.


Another problem, as mentioned, is that the job gains were predominately part-time positions, as the number of people working less than 35 hours a week surged by nearly 700,000 -- a record one-month rise. Sure, any job is better than no job. But it seems that employers are using part-time status as a replacement for full-time labor, avoiding the hassle of benefits, retirement plans and health coverage.


The final piece to the puzzle is the drop in the number working or looking for work. That number, represented by the chart of the labor force participation rate, has dropped to levels first seen in the late 1970s. Because of the way the math works, it is the drop in this number (a bad thing) that is causing the unemployment rate to fall (seen as a good thing). I guess you can't believe everything an economist tells you.


From a socioeconomic perspective, it's as if the whole two-income household thing is reverting to the one-income household paradigm of a generation ago. Unfortunately, we've accumulated a ton of debt since then that we need two incomes to service -- the topic of my column this week. Until these problems are fixed, the economic funk won't end.


As for stocks, there is far too much risk on both the long side and the short side. I'm recommending people step aside and wait for the speculative fever to break and the market to start paying attention to the hard data again, such as the parliamentary losses suffered by Italy's technocratic government, the drop in January factory orders (a "hard" data point not based on survey data) and the fact that Greece has yet to secure its next round of bailout cash.


Soon there will be plenty of opportunities to profit from the market's re-education of the structural issues we all still face, including the U.S. debt ceiling situation, the eurozone crisis and the lack of high-quality job creation. We just have to wait for this blow-off top to play out.

Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. The author can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

Feb 3, 2012 2:53PM

The job market figures we should look at are the civil participation in the workforce and the median salaries, as published by the Bureau of Labor Statistics. They clearly show that the participation has been dropping steadily and the trend is down for another five years. They also show that normal folks’ salaries also going down. China and globalization are a factor but the reason is that Americans have become so entitled they won’t get out of bed unless they think there is a chance of making it big doing very little. The proof is in the little effort our youth is making in school, the disdain for science and technology, the idiocy of our Congressmen who are too stupid to legislate and don’t mind lobbyists writing laws for them. That is the reason we have such horrible laws and such horrible prospects for future generations. We have lost our will to maintain our status as the greatest nation in history.

Feb 5, 2012 9:34AM

About twenty years ago, I was in a well known big box store.  I was looking for towels.  There were $8 beach towels near $16 beach towels.  The $8 towel was thinner with a lower thread count and inferior cotton fiber.  The $16 was much softer and probably more absorbent.  The $16 towel was woven in my home state of North Carolina.  The $8 towel was made somewhere in the third world. I watched people purchase the $8 towel.  When people did this, they killed the textile industry in Burlington, Greensboro, Winston-Salem, High Point, and the rest of North Carolina.  They may not have been great jobs, but they were jobs that Americans could perform.  I do not want to hear about the lack of good paying jobs in America when Americans killed American jobs. 


When you get serious about American jobs, we can create them.  But first, Turn off the TV.  Sit at the kitchen table and help your child with their homework.  Read a book to the kids.  Encourage your child to go to college to study math, science and engineering.  Or help your child learn a craft that cannot be sent to India.  Become a plumber, electrician, cabinetmaker.  Be willing to pay a higher price for superior American made quality.

Feb 3, 2012 11:33PM

I have been unemployed in the banking business for over 2 years.  It was my career for 36 years.  I am a loan person and since loans are really not being made, I am not needed.  Also: companies want young people who they can mold into their ROBOTS.  They do not want experienced thinkers.


I will be 62 in April and I applied for my SS today.  I will receive my first check on June 20.  Glad i was a saver and have basically stayed out of debt.


I do not have much hope from the Congress Dems or Reps since they have their own Cadillac health Care Plan that is not good enough for us and they have a DEFINED BENEFIT RETIREMENT PLAN that gives them $55,000 a year after serving 2 terms at age 55.  Take these away from them and let them see their hard earned SAVINGS GO AWAY IN THE MANIPULATED STOCK MARKET.


Our country needs to wake up to what is happening and I am not talking about THE BACHELOR, DANCING WITH THE STARS, THE JERSEY GIRLS and the other crab most people focus on (NON REALITY)!!! 

Feb 3, 2012 11:15PM
There is very simple - at least in my industry - solution...STOP OUTSOURCING US JOBS OVERSEAS!!! We'd then have the $$$ here in the USA to keep our homes, support our local businesses, etc. I believe this would help the 99% of us for certain, how could it not? No jobs, no money = no means.  
Feb 3, 2012 7:21PM
Everyone is getting excited over this job report.  Unemployment is still 8.3%, I have many friends without jobs, losing homes, unable to afford any kind of insurance much less medical insurance, broken young people without any hope. I just don't see this jobs report as a good sign, I see it as a very small decline in unemployment.  I'll withhold my judgment until 2013 and see if the trend continues...  I hope it does.

That's true.


I hope the very wealthy eventually see that the pursuit of having it all does not work unless you re-invest in the society (i.e. the bottom 99.99%).


These people need livable wages so they re-invest in their children, start businesses, invest, and yes, to a degree buy and build things (like homes and cars).


1980-2008 was a very bad idea. Instead of wage gains supporting economic growth, extension of credit replaced that. So people didn't see they weren't increasing their income all that much. It made it easier for prices on things like Healthcare, College Tuition, and Housing to climb too high.


I'll take a glimmer of light if we can get it. But I also feel this kind of period is necessary to force citizens to better prepare themselves and demand more of their leaders, both business and government.

Feb 3, 2012 7:51PM

What's very wrong with the economy? A national debt that can never be paid off, and chronic deficits that are within years of being no longer supported by our creditors. Life sucks now, you say? Well, wait till we're not runniing deficits anymore: The suckage will be audible.


We're about to hit a Greecey patch . . ..

Feb 3, 2012 5:12PM
Nothing will ever be the same.  I think the governmnt would like us to believe it is, but they are wealthy and have lost all track of what matters.  How about all that have quit looking? 
Feb 4, 2012 1:16AM

i've spent the last few years trying to figure out how can people ineligible to collect unemployment benefits count as people who've given up on looking for work. anthony is correct in his article. the math used by the government is just fraud. the economy still sucks because nobody that has been elected into congress or the presidency wants to do their job, but collect as much money from corporations as possible. i hope there's a viable solution someday to change this, but the outlook is so very grim.

Feb 3, 2012 2:57PM
It's amazing how rational and grounded in  hard principles this article is and Anthony's previous article was Keynesian drivel that has been shown to not work in practice.   I have two sons are engineers but are on a long-term pay freeze in their respective jobs and a relative who is in the process of losing a high paying operation director's position in big pharma.  I don't see any jobs improvement from my perspective.
Feb 5, 2012 10:56PM
ANTHONY, i  HAVE CRITICIZED YOUR VIEWS IN THE PAST, BUT I AGREE %100 WITH THIS ARTICLE, AND I commend you for having the THE ROUND SHAPES TO point this smokescreen out to the readers. glad to see you are not government controlled.
Feb 3, 2012 10:43PM

Finally someone tells it like it  is instead instead of painting a rose colored lie.

Feb 5, 2012 10:13AM

My first exposure to MSN Money and my first reading and ... I am so impressed. Anthony is spot-on as I've spent two years looking for a full-time position while I work in a one-hour-less-than-full-time professional position and experience the incentive to not work and qualify for Medicaid instead of working and having no health insurance. Sadly, I have too much self-esteem to travel that road.....




PS I am not into the class warfare thing but I do recognize 'Crony Capitalism' when I see it; the politically powerful (both sides) and the powerfully rich scratching each other's back while the country suffers. I'm qualified; just give me a full time job with benefits. Is it asking too much to work for a living?

Feb 4, 2012 11:49AM
Obama has taught companies to use part time work forces to replace full time employees who need benefits.  Sears did that 30 years ago and they are finally in a death spiral.  Things are not getting better for the long haul, it's an election year, all the numbers lie.  I like your observations Anthony, keep up the good work.  
Feb 3, 2012 7:15PM
This is an election year in which the US presidency is up for grabs, so it's not surprising that the party controlling The White House is spewing out BS statistics to sway the gullible and naive, in an attempt to get re-elected.

Yeah, I mean, the agency that does it has been functioning since 1940, and if you read their papers on statistical methodology, it's not as if it comes from the theoretical side of that field and is established and pursued that way by people with PHDs in economics/math/etc


Bush several times ran down to the BLS and advised them how to do things.




I mean, clearly, Presidents just come up with the above. I really hope my sarcasm is coming thru here.


  As 2012 progresses the BS and the vote buying will likely increase dramatically.  Take it for what it is.  The reality is that Obama has been bumming around in The White House for three years now, and even after stealing and squandering trillions of dollars of wealth from innocent future generations there's really nothing to show for it.  Which isn't surprising because big government just prolongs recessions.


I guess this depends on what you define as government and what is private.


In all honesty, there's lots of hard working government people (like statistical agencies, who pursue the data, of course, whoever uses the data in media is you know....). But the government is a wholly owned subsidiary of Corporate America today.


In a more honest analysis, what you are saying, *didn't prove out* in 1929. From 1929- January 1933 the government stood back and relied on *private markets* to fix the barreling train of the depression.


The result was a complete collapse (should be obvious, business will be the first to pull investment during downturns in a rush to the exit). What is more causing prolonged recessions these days is the Federal Reserve. And as much as people would like to point to it as a government entity. It is privately powered. And working on behalf of mega corporations and mega banks everywhere.


To prolong recessions and concentrate wealth and keep wages down. You know, those types of things.




 Businesses and the free market gradually adapt despite all the shenanigans of big government, and the economy gradually improves.  This is the way it's always been.

Except the depression?


They actually did the opposite of what you're saying. They *never* gradually fixed anything. They waited for government spending taken out on massive loan programs (i.e. selling bonds) to create demand and then momentum (largely military spending).




Businesses are not going to come in unless there's demand. Period. And where is demand going to come from when Business investment went from 16.5 billion in 1929 to 1.7 billion in 1933.


1933-1937 actually shows *again* the opposite of what you want to point out. FDR unbalanced the budget and spent, *then* private business starts investing again. 1937 comes along and what happens? Spending Hawks say to balance the budget *before* the recovery was in full hold.


1937-1938 is another recession, inside the depression. Eventually, massive government military spending pulls the private sector back in and finally a sustainable recovery occurs.

Feb 3, 2012 6:56PM
Everyone is getting excited over this job report.  Unemployment is still 8.3%, I have many friends without jobs, losing homes, unable to afford any kind of insurance much less medical insurance, broken young people without any hope. I just don't see this jobs report as a good sign, I see it as a very small decline in unemployment.  I'll withhold my judgment until 2013 and see if the trend continues...  I hope it does.
Feb 3, 2012 6:38PM
We have NEVER had a robust economy WITHOUT  a healthy housing market.
Feb 3, 2012 6:47PM
Well isn't this amazing.  Reminds me of the old adage, "figures don't lie bur liars figure".  Just look at the Bureau of Labor Statistics figures for the number of people employed during the months of December 2011 and January 2012, THERE WERE MORE THAN TWO MILLION FEWER WORKERS IN JANUARY vs DECEMBER.   Were all these part time McDonalds what the administration is crowing about??

No there weren't.


Please stop lying to people.


Here's the report for those who want to actually read it....




Page 8 of 42.


December 2011 *employed* 140.790 million....January 2012 *employed* 141.637 million.


Does that look like fewer workers? Nope. It's nearly 850,000 more actually. And how did that happen, if you look more into the report it is because both U-4 (marginally attached) and U-5 (discouraged) and U-3 found jobs.

Once the feds seasonally adjust the January figures we miraculously ADDED  200,000 jobs. 


The reports are *always* seasonally adjusted. This *subtracts jobs* in the summer time when hiring is much higher and adds in the winter time when hiring is much lower. I know, shocking, hiring is actually lower nationally in the winter time than the summer.


And of course, the administration doesn't report it, it's the BLS. Which administrations have been using since 1940ish. But I'm sure they went down there and personally changed the numbers.

Were all these part time McDonalds what the administration is crowing about??

Well, if you had actually read the report.


70,000 were in professional and business services, 50,000 in manufacturing, 31,000 in healthcare, Construction 21,000, Mining 10,000, 19,000 in Retail Trade, Leisure and Hospitality 44,000 (*foot note is 33,000 were in food services and drinking establishments)


I'm not even gonna be nice about this.


Why should anyone listen to your opinions? Seriously. Why? You *clearly* have not put the time or effort into understanding what you are talking about. Why do you think you have *the right* to advise information on subjects you have not made the personal commitment to gain knowledge of.


I'd like an explaination.

Feb 5, 2012 11:42AM
Employment sucks but Corporate America seems to be profitable and hopefully sustainable.  It will be the viability of the middle class that takes it in the shorts.  The wealthy class has consolidated it's power with the continued division in Income Disparity and more people are in official poverty than at any other time in the history of our country.  We seem to be going backwards, soon labor unions will be vogue again.
Feb 3, 2012 9:53PM

People are finding out all over the world that economic growth comes from private sector activity rather than from governments overtaxing and redistributing individual and collective wealth.


Barry's last day on the job will be 1.20.13.  The global economic recovery will begin in earnest the next day when the dismantling of the meddling junta will have begun.

Feb 3, 2012 5:38PM
low wages ,few hours no benifits that is all that is available THE GREAT DEPRESSION CONTINUES AND WILL FOR 5 MORE YEARS
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